One of the prerequisites of buying a new property is a home loan. The process of acquiring a home loan can be confusing and tedious. To help the customers with this, GuruKrupa Group has created a comprehensive step by step guide that offers information on home loans. Browse through below mentioned steps to gain insight and take the right decision.
Step 1: Application of Home Loan Form
This is the most first and basic step to begin with your home loan process. This step will include your personal, residential, income, employment, educational details, details about the property, estimated costs & current means of financing the property. Though the requirements may vary from bank to bank but there certain thing which every banks will ask. Generally, the bank will ask you to submit following documents:
These above mentioned documents will provide vital clues to the bank regarding your financial health.
Step 2: Processing Fees for Home Loan
An important thing to note about Home Loans is the processing fee. Banks charge a processing fee for every Home Loan application. This fees is non-refundable. This fee varies from bank to bank, but is usually around 0.25% to 0.50% of the total loan amount. For instance, if you take a loan of Rs 10 lakh, you will have to pay around Rs 2,500 to Rs 5,000 as processing fee. This fees is used by the bank to start and maintain your loan account, and includes work like sending Income Tax certificates every year, maintaining post-dated cheques, etc.
Step 3: Face To Face Evaluation & Field Investigation of Applicant
After successfully applying for the Home Loan and submitting the processing fees, the bank evaluates your application, decides in principal about your Home Loan and requires a personal meeting with the bank officials. This decision for personal interaction with applicant can be taken within 2-3 days of submitting a complete application form. The purpose of this personal interaction is to know more about the borrower and his repayment capacity.
Satisfied by your application and personal interaction, the bank proceeds to verify all the facts that you mentioned in your application for Home Loan. A field investigation process is initiated – to confirm and validate everything stated in the application form. Qualified representatives are sent by the bank to your office and place of residence to ascertain the facts. The references provided in the application are cross checked and verified. Once your credentials are validated, it helps establish trust between you and the bank.
Step 4: Credit Appraisal & Loan Sanction: Getting the nod
This is the make-or-break stage! If the bank is not convinced about your credentials, your application may get rejected. If it is satisfied, it sanctions your loan. The bank establishes your repayment capacity based on your income, age, qualifications, experience, employer, nature of business, etc., and based on these, the bank prepares an offer letter which contains the following details:
If you find the offer attractive & agree with all the facts mentioned in the offer letter, you will have to provide and acceptance copy to the bank. This is generally a duplicate of the offer letter signed by you, provided to the bank for its records. If the bank charges any Administrative fee, it will have to be submitted at this stage.
Step 5: Legal Verification of Property & Paper
Now, the focus of the bank's activities shifts from you to the property you intend to buy. Once you select your property, you need to hand over the entire set of original documents pertaining to your property to the bank so that it can keep them as security for the loan amount given to you. These normally include: The title documents of your seller, which prove the seller\'s title including the chain of title documents if he is not the first owner; NOCs from the legal owners such as cooperative housing societies, statutory development authorities, the lessor of the land in the case of leasehold land, etc. These documents remain in the bank's custody until the loan is fully repaid. Along with legal check, the banks also sends experts to the location of your property to conduct a technical valuation. If the property is under construction, the banks verify the stage of construction, quality of construction, progress of construction, locality, etc. and evaluate the property on established parameters. In case where the property is ready or is being resold the bank verifies the ownership, maintenance, age of property, quality of construction, locality & required legal clearances. The banks have qualified valuators, which assess the value of property on various parameters & decide on the amount loan. The sole purpose of this step is to ensure that the property has a clear title, is technically sound and meets the valuation standards of the bank.
Step 6: Disbursement: The Big Pay-out
After the bank has ensured that the property is legally and technically clear, all the original documents pertaining to transfer of ownership of property in your favour have been submitted and all the necessary loan agreements have been executed, finally, it is payment time! You will now actually receive the cheque in your hand. Time to celebrate! But hold on a second. Before the big moment arrives, you need to submit documents to prove that you have paid your personal contribution towards the property, since banks normally finance only up to 85‐90 per cent of the total cost of the house. In case you are expecting money from other sources to fund your own contribution, you need to provide sufficient evidence for the same. It is only after submitting this proof that the bank will release part‐disbursement of the loan. The cheque will be in the name of the reseller (for resale flats), builder, society or the development authority. It is only in exceptional circumstances, that is, if you provide documents to support that you have made an excess payment from your own account that the cheque will be handed over to you directly by the bank.
Availing a home loan comes with multiple benefits. Home loans let you achieve your goal of buying a new home and make you eligible for tax benefits. These tax benefits can contribute towards your EMI flow and savings. Take a look at the following points and calculate your tax benefits based on your loan amount.
The home loan borrower enjoys Tax Benefit on both interest paid & the principal re-paid. For the purpose of simplicity & easy understanding, a comparison of Tax Benefits on Home Loan under section 24 & Section 80C has been made here under:
Choosing the right home loan got so much easier. Use this simple calculator to know the exact amount of your EMIs. Enter your loan amount, interest rate and the number of years to get your answer.